Tribunal extends limitation period for debt acknowledgment, grants Corporate Debtor 6-month settlement window.

The Tribunal held that the Section 7 application was not time-barred, as the debt acknowledgment extended the limitation period. The debt was confirmed as a financial debt, and default in repayment was established. Despite these findings, due to economic circumstances and settlement efforts, the Tribunal granted a six-month period for the Corporate Debtor to settle the matter before allowing the initiation of Corporate Insolvency Resolution Process (CIRP).

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Issues Involved:
1. Whether the application under Section 7 of the Insolvency and Bankruptcy Code (IBC) is barred by limitation.
2. Whether the debt in question qualifies as a "Financial Debt" under Section 5(8) of the IBC.
3. Whether the Corporate Debtor defaulted in repayment of the financial debt.
4. Whether the initiation of the Corporate Insolvency Resolution Process (CIRP) is justified.

Detailed Analysis:

Issue 1: Limitation Period for Section 7 Application
The primary issue was whether the Section 7 application filed by Union Bank of India was barred by limitation. The Appellant argued that the application was time-barred as the date of NPA was 30.09.2015, and the application was filed on 27.12.2019, exceeding the three-year limitation period specified under Article 137 of the Limitation Act, 1963. The Respondent countered that the debt was acknowledged in various communications and payments, including a revival letter dated 01.06.2017, which extended the limitation period.

The Tribunal noted that the limitation period is a mixed question of law and fact, and the starting point of limitation is a question of fact. It was observed that the Corporate Debtor had acknowledged the debt through various agreements and payments, including a One Time Settlement (OTS) agreement dated 27.11.2019. The Tribunal held that the application was not barred by limitation, as the period of limitation of three years was satisfied due to the continuous acknowledgment of debt.

Issue 2: Nature of Debt as "Financial Debt"
The Tribunal examined whether the debt in question qualifies as a "Financial Debt" under Section 5(8) of the IBC. The Adjudicating Authority had earlier established that the debt was a financial debt, as the Corporate Debtor did not deny the debt amount and had defaulted in repayment. The Tribunal upheld this finding, noting that the debt was indeed a financial debt as defined under the IBC.

Issue 3: Default in Repayment
The Tribunal also considered whether there was a default in repayment of the financial debt. The Adjudicating Authority had found that there was a default, as the Corporate Debtor had not adhered to the repayment schedule and had acknowledged the debt in various communications. The Tribunal agreed with this finding, noting that the Corporate Debtor had defaulted in repaying the financial debt.

Issue 4: Justification for Initiation of CIRP
The Tribunal assessed whether the initiation of the CIRP was justified. The Corporate Debtor argued that the initiation of CIRP would cause grave economic loss, as the project was at a threshold stage and ready to be rolled out. The Tribunal acknowledged the economic impact of the pandemic on the travel and tourism sector, the core business of the Corporate Debtor. It was noted that the Corporate Debtor had made efforts to settle the dues with other banks and had entered into OTS agreements.

In the interest of justice, the Tribunal set aside the admission of the Section 7 application and provided the Corporate Debtor with a six-month period to settle the matter. If the Corporate Debtor fails to settle within this period, the Respondent Bank is at liberty to take appropriate steps.

Conclusion:
The Tribunal concluded that the Section 7 application was not barred by limitation, the debt qualified as a financial debt, and there was a default in repayment. However, considering the economic impact of the pandemic and the efforts made by the Corporate Debtor to settle the dues, the Tribunal provided a six-month period for settlement before allowing the initiation of CIRP.

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